Are Meal and Rest Period Payments Part of One's Pay Rate for OT Purposes?

One of the things we discussed at last week's wage & hour seminar in Costa Mesa was the long list of questions that remain unanswered after Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094. Here's one we hadn't mentioned before:

Must meal and rest period premium wages be included in the "regular rate of pay" upon which overtime is calculated?

The DLSE originally said that such pay should not be included in the regular rate of pay, and most practitioners considered the question answered. However, with the way the Supreme Court analyzed the wage-penalty issue, some people think the answer is no longer so clear, and an argument can be made that such pay increases an employee's regular rate of pay for the purpose of calculating the correct overtime rate. We haven't seen any briefs arguing the point, and we haven't briefed the issue ourselves, but the point seems well worth raising.

Comments

Here's what I got: Generally, premiums (such as show-up, split shift, and overtime pay) are not included in the "regular rate."

But, a Littler article distinguishes premiums for worktime (e.g., shift differential) from premiums for non-worktime (show-up and split shift), pointing out the former are included while the later excluded. Per Littler (see text for footnote 19 at http://www.littler.com/presspublications/index.cfm?event=pubItem&pubItemID=16323&childViewID=235 online): "While the Labor Commissioner had informally opined that such premiums are not included in the regular rate of pay, the remedies for missed meal and rest periods are akin to the premiums paid for working off-hours shifts, and such shift differential premiums are included in the overtime calculation. Inasmuch as the meal and rest period premiums are pay for work actually performed, it is difficult to exclude such amounts from the regular rate on the basis that pay for time not worked, such as minimum reporting pay, is excluded from the regular rate of pay."

However, the Labor Commissioner amended the DLSE manual §49.1.3 on 5/2/07 to say the "extra hour" premium is EXcluded. It now reads: "Reporting Time Pay, Extra Hour For Failure To Provide Meal Period, Extra Hour For Failure To Provide Break And Split Shift Pay Need Not Be Included. In Murphy v. Kenneth Cole (2007) 2007 WL 1111223, the Court indicated that meal period pay, rest period pay, reporting time pay and split shift premium are all forms of pay similar to overtime premium. Because these payments are in the nature of premiums required by law, they are not included in computing the regular rate of pay on the same basis that overtime premium is not included in regular rate calculations."

LC 226.7(b) provides, "If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the IWC, the employer shall pay the employee one additional hour of pay at the employee's REGULAR RATE of compensation for each work day that the meal or rest period is not provided.

1. Does this language not presuppose you calculate the "regular rate" independent of missed meal/rest pay and then multiply that computed rate by the number of missed meals?

2. If you include LC 226.7 pay into the regular rate computations don't you get caught up in noncomputable, circuitous, mathematical calculations (eg., the missed meal/rest payment must be paid at the "regular rate" but the regular rate must include the missed meal/rest break payment)?